1st Mar 2022 14:15
(Alliance News) - Oil major Shell PLC's decision to cut ties with Russia is likely to place increased pressure on rivals TotalEnergies SE and Exxon Mobil Corp to follow suit.
Shell on Monday said it will exit its joint ventures with Russian oil firm PJSC Gazprom and also its involvement with the Nord Stream 2 pipeline project, following Russia's invasion of Ukraine.
In particular, Shell will exit its 28% interest in the Sakhalin-II liquefied natural gas facility, its 50% stake in Salym Petroleum Development NV and its 50% interest the Gydan energy venture.
The Salym JV is focused on development in Salym fields in the Khanty Mansiysk Autonomous District of western Siberia, while Gydan is a joint venture between Kremlin-backed Gazprom and Shell, for the exploration and development of block in the Gydan peninsula, north-western Siberia.
Also, Shell was one of five energy firms which committed to provide financing and guarantees for up to 10% of the estimated EUR9.5 billion cost of Nord Stream 2.
Similarly, BP PLC on Sunday announced its decision to exit its near 20% stake in Russia's oil producer Rosneft.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "The move to exit from these Russian joint ventures hasn't come as a total surprise, given BP's decision in recent days and the fact Shell has comparatively smaller exposure to Russia. From an operational perspective, the biggest impact will come from a capacity reduction from the loss of the Sakhalin project. Shell has been trying to expand its liquefied natural gas portfolio, of which the Sakhalin stake played a role.
"The unwinding of these joint ventures won't be an immediate process, giving Shell time and space to reposition contracts. At the same time, shareholders will be glad to see planned shareholder returns haven't been affected by this decision, with impairment charges relating to the USD3.0 billion of assets in Russia, expected to be manageable."
In addition, Norwegian oil company Equinor and Germany's Daimler Truck are ending their partnerships with Russian businesses. Automakers Volvo and Jaguar Land Rover also said they were halting deliveries of cars to the country as the fallout from the invasion of Ukraine amplifies.
However, US oil major Exxon Mobil holds a 30% stake in a natural gas project located in Russia's Sakhalin Island, as well as a 7.5% interest in the Caspian Pipeline Consortium, which exports oil from Kazakhstan through Russia.
The Irving, Texas-based firm will likely face heightened scrutiny to follow its peers in severing ties with Russia.
TotalEnergies, which holds a 19.4% stake in the Russian gas producer Novatek and an interest in the Yamal LNG, said Tuesday it will no longer provide capital for new projects in Russia. The Courbevoie, France-based company "condemns" Russia's actions against Ukraine and "expresses its solidarity" with the Ukrainian people.
"Traders will be looking at other oil and energy companies, and they will be anticipating a similar move by them. Exxon is one company that could potentially announce a similar action today or in the coming days," said AvaTrade analyst Naeem Aslam.
By Arvind Bhunjun; [email protected]
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